Northgate buys HR outsourcer

Deal forms mega European HR player

UK vendor, Northgate Information Solutions has agreed to buy a majority stake in Arinso International of Belgium, combining two big European providers of human resources (HR) software and services.

One analyst called it a good match that could help Northgate expand internationally. But it raises potential conflicts because Northgate has its own human resources software, and Arinso's services are based on HR and payroll applications from SAP, said Ovum analyst Samad Masood.

Northgate agreed to pay €228.4 million (£155.7m) to buy the 60% of Arinso owned by its chief executive, Jos Sluys, Northgate said. It expects to complete the deal by 1 August, subject to shareholder approval, after which it will make an offer to buy the remainder of Arinso, it said. The value of the total acquisition will be €377.9 million, it said.

Based near London, Northgate provides HR software and outsourcing services to 9,700 clients, including most of the UK's local public authorities and all its police forces. Their customers are mostly in the UK and Ireland, although it has partners or offices in a handful of Asian and other European countries.

Arinso operates in 27 countries in Europe, Asia and the Americas. It offers HR outsourcing, integration and consulting services based around software from SAP. The company had revenue of €203.8 million for the 2006 calendar year.

But Masood said: "There is a concern that the acquisition might complicate Arinso's relationship with SAP."

Northgate's products are aimed at customers who are typically too small to invest in big SAP implementations, he said, so the deal "should not be too much of a problem in the near term".

"But in the big picture this acquisition is about building a technology agnostic HR services business, and in the longer term we would not be surprised if Northgate/Arinso consider targeting large clients that are not SAP-centric," Masood added.